Indy: Expect big budget teams to win
In the sport of auto racing, speed makes money. In the business of auto racing, speed costs money. "That's the paradox of motor sports," said Kevin Savoree, co-owner of Andretti Green Racing. "In our business model, prize money is the main factor in whether we're profitable or not. You have to go fast enough to win, and you have to spend enough to go fast."
The evidence is right there in the starting lineup for Sunday's Indianapolis 500. The three teams with the biggest annual budgets have the top six cars on the grid and nine cars overall. Multimillion-dollar sponsorship for those teams pays for the best drivers, the best engineers, the best of everything -- which translates into the best results.
Another 14 of Sunday's drivers come from the five other teams that compete regularly in the Indy Racing League, where races usually have fields of 18 cars.
But one race a year, on Memorial Day weekend in Indianapolis, the field swells to 33, and the resource disparity is amplified. The back of the pack Sunday will be loaded with solo entries of teams that scrimp, save and hope just to participate, with little chance of winning.
Even if the sagging popularity of open-wheel racing has caused the Indy 500 to lose some of its luster, it remains the event that teams put the most into and get the most out of. The sponsors' exposure and a total purse of more than $10 million far exceed any other race.
"It's 10 normal races rolled into one," said Dennis Reinbold, co-owner of Dreyer & Reinbold Racing.
Here's a look at how money talks in the Indy 500.
The three top-tier programs spend about $6 million to run a car for the full season. Additional cars swell the budget by several million dollars apiece.
The investment pays off. Andretti Green, Team Penske and Ganassi Racing have won six of the past seven 500s, 19 consecutive IndyCar Series races and four consecutive season championships.
"Penske and Ganassi get the most money, and in turn that gets them the best people," said Scott Roembke, chief operating officer of Rahal Letterman Racing.
"But I think sometimes (14-time Indy 500 winner Roger Penske) doesn't get enough credit. I've seen guys spend a lot of money expecting to win, and they're gone now because they didn't. So it's not just spending, it's spending wisely."
Profitability also is tied to the driver's ability to avoid crashes. With no insurance available, repairs are paid for out of the team's coffers. Andretti Green Racing has a crash fund, and whatever is left at the end of the year counts as profit.
Every full-time team's biggest expense is payroll. At Andretti Green, which has 110 employees for its four-car team, salaries eat up about 40 percent of the budget. Next comes equipment, topped by $1 million for a yearlong engine lease with Honda for each car. A Dallara chassis sells for around $700,000, basic components and electronics eat up another $400,000 and tires for the year cost $200,000.
Toss in shop and travel expenses, hospitality at the tracks to entertain guests and sponsors and assorted other expenses, and that $6 million gets eaten up pretty quickly.
"If you run it right, there's a way to make money at it," said Savoree, whose Andretti Green team has five cars in the top 11 starting the 500. "You have to be fiscally responsible and balance what you spend on the technical side." More at Indy Star